PPS Investments: CPI for November 2023

Consumer price inflation increased by 5.5% year-on-year in November 2023, down from the 5.9% year-on-year print in October, and the sixth consecutive month that inflation has been within the 3%-6% target band.

This signals the first decline in year-on-year inflation since July and inflation now averages just below 6.0% for the year to date. Month-on-month inflation decreased by 0.1%, after an increase of 0.9% in October.

Food and non-alcoholic beverages (1.6%), housing and utilities (1.3%), and miscellaneous goods and services (0.8%) were the largest contributors to inflation, with all three contributions being unchanged from last month. The adjustment in inflation was as a result of transport where the contribution for the month decreased by 0.3% and year-on-year the contribution declined from 1.1% to 0.7%. On a subsector level, the increase in electricity prices by 15.1% and food and non-alcoholic beverages by 9.0% continues to make economic conditions difficult for consumers.

The big question will be if this is the turnaround point for inflation and subsequently for interest rates. At the most recent Monetary Policy Committee meeting the members voted unanimously for no change in interest rates even though inflation was close to the top end of the target band at that point, signalling an expectation of inflation moderating. The PPS portfolios benefited from this sentiment as bond yields rallied due to the exposure to both local and global bonds.